S.V. PHARMACY AND NURSING HOME,ALUVA vs. THE JCIT, ALUVA RANGE, ALUVA, ALUVA

Joint Commissioner of Income Tax (AO) u/s 271D vide order dated 25.05.2011. Having heard, rival submissions, the appeal is disposed- off as under.

The impugned penalty stem from the fact that during assessment proceedings, it was noted that the assessee received deposit of Rs.5 Lacs as rent advance from Margin free Shop against letting of the property belonging to the assessee. The Ld. AO, holding the same to be security deposit received in violation of Sec.269SS, imposed impugned penalty u/s 271D. The Ld. CIT(A) confirmed the same against which the assessee is in further appeal before us.

The Ld. AR explained that the amount is received in consideration of letting out of the property with the condition that the rent arrears would be adjusted from the same and balance would be refunded to the payee. The Ld. AR submitted that the receipts were genuine and under bona fide belief that the same would not come within purview of Sec.269SS. The Ld. Sr. DR pleaded for confirmation of penalty.

From the fact, it emerges that what the assessee has received is rent advance from which rental arrears could be adjusted by the assessee. The same would be taxable as Income from House Property. Therefore, such receipts could neither be considered as deposit nor loan which call for imposition of penalty in terms of Sec.269SS. Further, the assessee was under bona fide belief that such receipts would not come within the purview of Sec.269SS. The case law of Hon’ble Punjab & Haryana High Court in CIT vs. Saini Medical Store (277 ITR 420) supports the case of the assessee wherein it was held that a combined reading of provisions of sections 271E and 273B of the Act makes it clear that if the assessee shows reasonable cause for the failure to comply with any provision referred thereto, the penalty for its violation shall not be imposable on the assessee. There was no intention to avoid or evade the taxes. Therefore, considering the factual matrix, we delete the impugned penalty and allow the appeal of the assessee which makes stay application infructuous.

The appeal stands allowed. The stay application stands dismissed as infructuous.